A Letter to a College Classmate: Thoughts on Insurance Repairs


I’m sorry I don’t work in your State, I would be more than happy to help you out with your recent “kitchen flood”.   Hopefully, I can answer some of your questions about the process you are going through from the perspective of a Professional Remodeling Contractor that has been involved in his share of insurance restorations over the years (Four Hurricanes to date, not to mention all the other things that “happen” to homes)

All flooring and drywall had to be removed because of water heater failing in attic

Water Heater in Attic Failed – all materials that could not be dried were removed

I’d like to start this discussion with a saying that my very close friends who are in insurance and I share: “99% of insurance adjusters and contractors give the rest a bad name”.  I have great friends in the insurance business who are ethical and honorable people. We all have very strong opinions on the matter and theirs are every bit as valid.  I hope they don’t get too mad at my opinions, here.

Insurance adjusting is done by an entirely separate department of the insurance company.  The agent has little to no interaction and the personal relationship between the agent and the customer is usually not in play.  The “Adjustment” or estimating the value of insurance losses has become “a game” in the home repair world.  Unfortunately, in my opinion, the game stinks.

This is what your house looks like after all the moisture damaged materials are removed

This is what your house looks like after all the moisture damaged materials are removed

Insurance Adjustment for repairs is a silly game that some contractors refuse to play.  I know of ZERO Award Winning Professional Remodeling Contractors who specialize in insurance restoration or repairs.  All of us have to do them from time to time because crap happens to people we care about and we want to help our friends and neighbors.  The insurance “game” is so tedious that most of us contractors run from it.  Unfortunately, homeowners are the ones who suffer.   Here are a few of my thoughts from my experiences with insurance repairs:

There is no "refurbishing" a fireplace insert that has been damaged this badly. Replace it.

There is no “refurbishing” a fireplace insert that has been damaged this badly. Replace it.

I. Insurance Adjusters and Professional Contractors Estimate Projects Using Different Methods.

The insurance companies all use a program called Xactimate to estimate the cost of repairs. Without going into a long, boring explanation, suffice to say a legit pro can’t do the repairs for the amount that Xactimate allows for.  No builders or remodelers I know use Xactimate for their estimating  (I know a few contractors that specialize in insurance restoration that use it). Therefore, the homeowner is left with a few options:

  1.  Use the contractor the insurance company recommends. This is a contractor that has agreed to “choke down” the slop that the insurance company will feed them.  They believe they can:
    1.  Make it up on volume of work that the insurance company will graciously bestow upon them or play games with the Xactimate program to find hidden charges that the insurance company must eat.
    2.  Cut enough corners that they can lower their labor and material cost on the job in order to make a decent margin under the “fixed” price they have agreed to .
    3.  Needless to say, I am often called in afterwards to fix what the other contractor fixed…of course it’s a year or so later, out of warranty and out of the owner’s pocket.
      1. Case in point, here are the my office’s notes for my 4pm appointment today – “needs structural, electrical, and plumbing repairs. had a full renovation under insurance and it was not done correctly. needs it redone up to proper codes and standards”
  2. Get their own contractor and pay for the difference between what the insurance company will allow for and what the contractor will do the job for.
  3. Get their own contractor and fight with the insurance company to pay the right price for the right job with their choice of contractor.
    1. This happens to be the law by the way: The homeowner has the right to chose the contractor they want.
    2. But the insurance adjusters are adept at pulling the wool over the homeowner’s eyes. It usually sounds something like
      1. “We are committed to paying you for your full loss, Mr. Jones, but this contractor’s prices do not appear to be in alignment with the current market. I can bring in another contractor right now to do it for what we are allowing”
      2. Or my favorite: “It’s no problem, Mr. Jones. If you find that the repairs exceed what we’ve allowed after the job is complete just file a SUPPLEMENTAL claim.”  (Read: pay for it out of your pocket, go through this whole nightmare claim process again and we’ll send another guy out here to start all over.)
        1. The only way I’ve ever seen this work is when the homeowner stands firm about their choice of contractor and says “THIS is my contractor, I’m not using ANYONE else. THIS is the price. PAY IT.”
        2. Unfortunately, most homeowners don’t have enough trust & confidence in one contractor to stand up for themselves to the savvy insurance adjuster.
Flood damaged home's electrical panel

Flood damaged home’s electrical panel

II. The biggest problem: Adjuster and Contractor are not on same page as to the Scope of Work:

  1. For what it’s worth, I have learned a technique that works quite well when I have to compare an insurance adjuster’s estimate with mine.
  2. If you can imagine the two estimates usually come in quite far apart pricewise, which usually prompts the less “seasoned” adjusters and contractors to call each other “crazy” – basically because each of them are confident that they priced their project very carefully and how could anyone in their right mind be that far off??
  3. So, what I’ve learned to do is sit down with the insurance adjuster and say “let’s put price aside for the moment and just focus on:
    1. Scope of work – exactly what work is being performed in each of our estimates.
    2. Specifications – to what standards & quantities the work is being performed. (i.e. “install soaking tub”  vs. “install 6 ft porcelain on cast iron 89 gal tub”)
    3. Selections – what fixtures are being used for plumbing? What fixtures are being used for electrical? What type of tile?
    4. I have found that when the two estimates are lined up with those three things, the prices are almost dead even every time.
      1. How does this happen? Xactimate doesn’t work this way – it takes time and effort to develop an estimate with this detail.
      2.  Therefore, I know in the beginning, if the prices are way off, the two estimates are not pricing the same job (scope, specifications & selections).
        What kind of bathroom vanity will the insurance allow for?  What kind of sinks? What kind of fixtures? How do you know?

        What kind of bathroom vanity will the insurance allow for? What kind of sinks? What kind of fixtures? How do you know?


        III. Moisture –

        1. The good thing is that you had a remediation company come out to do the demo and dry-out and they probably documented the areas that had higher moisture levels. That documentation is critical towards getting the insurance company to agree to the scope of the work that is performed.  Anytime you need some leverage as to the adjuster agreeing to what moisture damaged areas should be removed and replaced, merely say “I’m fine with not replacing that as long as I get in writing from you that you are liable for any mold that may develop in the future.”
          1. The word “mold” strikes blind fear in the hearts of insurance adjusters. They will never take a chance on it.  Any liability to the insurance company because of their negligence will mean their job.
        2. If you had a flood and you have to demo the kitchen floor, it would be in your best interests to have an independent person get in the crawlspace and ensure that there is no additional hidden moisture damage or mold growth on subflooring, framing or any standing water.
          mold growth on AC ducts in crawl space due to water heater flood

          mold growth on AC ducts in crawl space due to water heater flood


          IV. Practical Money Tips –

          1. If there was ever a time you thought about improving or changing your kitchen, now would be the time to do it. However, a few tips:
            1. Settle the insurance scope of work and financial compensation with your insurance first. Don’t mix the “estimate to repair the old stuff” with the “estimate to change it”
            2. Keep the insurance company completely out of the discussion about any changes. Only speak to them about the cost to restore your home as it was with “like kind and quality”.
            3. Write a completely separate contract and detailed scope of work with the contractor about how the area will be changed, put back together and finished. It is as important to define what is “excluded” from their scope of work as it is to define what is “included”.

              This is Key

              V. Rules to Remember:

              1. “The faintest ink beats the best memory”
              2. “It doesn’t matter, until it matters”
              3. “Unmet expectations lead to friction and trouble.” (ensure all expectations are defined up front in writing)
              4. The most important decision you will make in this entire process is the selection of the contractor. The right contractor will make the process go as smoothly as possible, with the least disruption to your life and family as possible and provide you with a quality job with quality materials that will serve your family well while you live in the home and that will appreciate in value with your home and eventually pay for the job itself.
              5. Only the truly wealthy can afford the “low bid” contractor, because only the truly wealthy can afford to pay to have it fixed properly a second time.

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